Your Roommate Is Having Trouble Grasping How Monetary Policy Works

question 53

Multiple Choice

Your roommate is having trouble grasping how monetary policy works.Which of the following explanations could you use to correctly describe the mechanism by which the Bank of Canada can affect the economy through monetary policy? Increasing the money supply

• A)lowers the interest rate, and firms increase investment spending.
• B)causes people to spend more because they know prices will rise in the future.
• C)raises the interest rate and consumers decrease spending on durable goods.
• D)lowers the interest rate, raises the value of the dollar, lowers the prices of exports, and raises net exports.
• E)Increasing the money supply reduces the cost of the government to borrow allowing the government to engage in more expansionary fiscal policy.

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Definitions:

Delta Waves

Slow brain waves typically associated with the deep sleep stage, aiding in healing and regeneration of the body.

Beta Waves

A pattern of brain wave activity associated with active, alert cognition and wakefulness.

Theta Waves

Low-frequency brainwaves that are primarily associated with sleep, deep relaxation, and meditation.

Theta Waves

Brainwave patterns associated with deep relaxation, meditation, and the early stages of sleep, typically observed in the frequency range of 4-8 Hz.